When Google went public in 2004 for $85 a share, I wrote a column questioning such a high valuation for a company built on a math equation. Wasn’t it inevitable that someone would come along with a better search algorithm?

Google closed Monday at $908.53 a share.

So take what I’m about to say with a pinch of cyber-salt.

Yahoo is paying $1.1 billion for the blogging service Tumblr, which enjoys a loyal following among millions of young, cool, edgy and influential users, but little, if any, profit.

Let me reiterate that: $1.1 billion for a privately held company that barely pulls down pocket change, if that.

Moreover, Tumblr’s young, cool, edgy and influential users are so fickle that Yahoo’s chief executive, Marissa Mayer, had to declare Monday that Yahoo wouldn’t screw up the site by making Tumblr more like, you know, Yahoo.

At the risk of sounding like an old fogy, what the heck kind of business deal is this when more than a billion bucks is being spent on a financially dubious tech outfit, and the new owner has to swear it won’t muck things up by actually owning it?

“That’s a fair question,” said John Blackledge, a financial analyst at the investment firm Cowen & Co. “But the purchase seems reasonable given the potential synergy.”

I spoke with a handful of Wall Street types after the Yahoo-Tumblr deal was announced, and nearly every one of them used the word “synergy.”

It’s a word that’s tossed around any time some mega-deal gets announced. When AOL said it was buying Time Warner for $160 billion in 2000, it was all about the synergy of the two media heavyweights.

That deal is now viewed as one of the dumbest mergers in U.S. corporate history.

EBay’s 2005 purchase of Skype for $2.6 billion was also said to be a model of synergy. EBay was so synergized that it sold off Skype at a huge loss just four years later.

And that brings up another point: Can you buy your way to cool?

After EBay dumped Skype, the online calling service was snapped up in 2011 by Microsoft for a hefty $8.5 billion. Synergy was the watchword.

Skype certainly isn’t hurting. Microsoft estimates that a third of the world’s voice calls now occur on Skype. But in an increasingly text-driven world, is that like cornering the market on a commodity that fewer and fewer people want?

And is Microsoft any cooler for having Skype in its fold? You could argue that anything a techno-dinosaur like Microsoft touches becomes, by definition, instantly uncool.

Yahoo has the same image problem. Yet all the analysts I spoke with said one of the reasons Yahoo would pay such a high price for Tumblr is a desire to bask in the blogging site’s reflected cool.

“Yahoo has been needing to attract a younger demographic, which is how you attract advertisers,” said Ron Josey, managing director of JMP Securities. “Maybe Tumblr is the spark to do that.”

Maybe. Or maybe not.

WASHINGTON — Apple Inc. has used an elaborate web of offshore subsidiaries to avoid paying billions of dollars in U.S. taxes on $44 billion in foreign income over the past four years, a Senate investigation has found.

Many of the tactics, such as cost-sharing arrangements, are common among large multinational corporations seeking to shift profits to countries with lower tax rates. The investigation did not find Apple violated any laws.

But three of its subsidiaries in Ireland claim to have no responsibility to pay income taxes to any country, according to a 40-page, bipartisan report released Monday by the Senate Permanent Subcommittee on Investigations.

One of those subsidiaries, Apple Operations International, which has no employees but reported $30 billion in income from 2009-2012, has not filed an income tax return in any country for the past five years, the investigation found.

“Apple wasn’t satisfied with shifting its profits to a low-tax, offshore tax haven,” said Sen. Carl Levin (D-Mich.), the subcommittee’s  chairman and a longtime advocate for tightening U.S. corporate tax laws. “Apple sought the Holy Grail of tax avoidance.”

Quiz: Test your Apple knowledge

Chief Executive Timothy Cook is scheduled to testify Tuesday about the company’s tax practices at a hearing by the subcommittee on offshore profit shifting. Apple’s chief financial officer, Peter Oppenheimer, and its head of tax operations, Phillip Bullock, also are scheduled to testify.

In written testimony prepared for the hearing, Apple said the company is “a powerful engine of job creation in the U.S.” and “pays an extraordinary amount in U.S. taxes” — $6 billion last year.

Apple said it does not use “tax gimmicks.”

“Apple has substantial foreign cash because it sells the majority of its products outside the U.S.,” the company said.

The report follows a similar one last year of tax-avoidance practices by Microsoft Corp. and Hewlett-Packard Co. as the subcommittee has focused on multinational high-tech companies, in part, because of their ability to shift costs related to intellectual property to low-tax countries such as Ireland, Bermuda and the Cayman Islands.

The findings come as key Republican and Democratic lawmakers, urged on by the White House, are looking to overhaul the tax code, including eliminating some business breaks and lowering the corporate rate to try to make the U.S. more competitive globally.

The U.S. has a 35% corporate tax rate and, combined with state and local taxes, has the highest rate among developed nations. The effective rate, however, is much lower.

Companies can stash foreign earnings abroad and do not have to pay U.S. taxes on the money until it is brought back to the U.S. The subcommittee report cited private estimates that U.S. multinational companies have more than $1.7 trillion in foreign earnings parked overseas.

Of Apple’s $145 billion in cash as of April, about $102 billion is overseas. By keeping profits offshore, the company was able to reduce its effective tax rate to 24.2% in 2011.

Cook said last week that he planned to urge lawmakers to dramatically simplify corporate tax laws. Among the changes he planned to propose was is to lower the rate paid on foreign earnings brought back to the U.S.

Republicans also have pushed for reducing the tax rate on foreign earnings by U.S. firms. But they are at odds with President Obama and many Democrats who want to set a new minimum tax rate on foreign corporate profits, even if they are never brought back to the U.S.

Ireland is key to Apple’s tax strategy, the investigation found. The country has a 12% statutory tax rate, though Apple has negotiated a rate of less than 2% on its operations there.

From 2009-2012, Apple shifted $74 billion in income from sales outside of North and South America to Apple Sales International, one of three subsidiaries in Ireland, through complex cost-sharing agreements. For those three years, the company paid less than 1% in taxes on those sales, well below even the low rate it had negotiated with Ireland, the report said.

Many of the tactics, such as cost-sharing arrangements, are common among large multinational corporations seeking to shift profits to countries with lower tax rates. The investigation did not find Apple violated any laws.

But three of its subsidiaries in Ireland claim to have no responsibility to pay income taxes to any country, according to a 40-page, bipartisan report released Monday by the Senate Permanent Subcommittee on Investigations.

One of those subsidiaries, Apple Operations International, which has no employees but reported $30 billion in income from 2009-2012, has not filed an income tax return in any country for the past five years, the investigation found.

“Apple wasn’t satisfied with shifting its profits to a low-tax, offshore tax haven,” said Sen. Carl Levin (D-Mich.), the subcommittee’s  chairman and a longtime advocate for tightening U.S. corporate tax laws. “Apple sought the Holy Grail of tax avoidance.”

Quiz: Test your Apple knowledge

Chief Executive Timothy Cook is scheduled to testify Tuesday about the company’s tax practices at a hearing by the subcommittee on offshore profit shifting. Apple’s chief financial officer, Peter Oppenheimer, and its head of tax operations, Phillip Bullock, also are scheduled to testify.

In written testimony prepared for the hearing, Apple said the company is “a powerful engine of job creation in the U.S.” and “pays an extraordinary amount in U.S. taxes” — $6 billion last year.

Apple said it does not use “tax gimmicks.”

“Apple has substantial foreign cash because it sells the majority of its products outside the U.S.,” the company said.

The report follows a similar one last year of tax-avoidance practices by Microsoft Corp. and Hewlett-Packard Co. as the subcommittee has focused on multinational high-tech companies, in part, because of their ability to shift costs related to intellectual property to low-tax countries such as Ireland, Bermuda and the Cayman Islands.

The findings come as key Republican and Democratic lawmakers, urged on by the White House, are looking to overhaul the tax code, including eliminating some business breaks and lowering the corporate rate to try to make the U.S. more competitive globally.

The U.S. has a 35% corporate tax rate and, combined with state and local taxes, has the highest rate among developed nations. The effective rate, however, is much lower.

Companies can stash foreign earnings abroad and do not have to pay U.S. taxes on the money until it is brought back to the U.S. The subcommittee report cited private estimates that U.S. multinational companies have more than $1.7 trillion in foreign earnings parked overseas.

Of Apple’s $145 billion in cash as of April, about $102 billion is overseas. By keeping profits offshore, the company was able to reduce its effective tax rate to 24.2% in 2011.

Cook said last week that he planned to urge lawmakers to dramatically simplify corporate tax laws. Among the changes he planned to propose was is to lower the rate paid on foreign earnings brought back to the U.S.

Republicans also have pushed for reducing the tax rate on foreign earnings by U.S. firms. But they are at odds with President Obama and many Democrats who want to set a new minimum tax rate on foreign corporate profits, even if they are never brought back to the U.S.

Ireland is key to Apple’s tax strategy, the investigation found. The country has a 12% statutory tax rate, though Apple has negotiated a rate of less than 2% on its operations there.

From 2009-2012, Apple shifted $74 billion in income from sales outside of North and South America to Apple Sales International, one of three subsidiaries in Ireland, through complex cost-sharing agreements. For those three years, the company paid less than 1% in taxes on those sales, well below even the low rate it had negotiated with Ireland, the report said.

For example, Apple Sales paid $10 million in taxes on $22 billion in earnings in 2011, resulting ina tax rate of 0.05%, the report said.

Apple told subcommittee investigators that Apple Sales, along with Apple Operations International and Apple Operations Europe, all based in Ireland, are not responsible for paying taxes there because they are not managed or controlled in that country, a requirement under Irish law.

And they are not required to pay taxes in the U.S. because they aren’t physically located here.

In its prepared testimony, Apple said that it began operations in Ireland in 1980 and that its subsidiaries there, including a fourth one, Apple Distribution International, “employ nearly 4,000 people and pay taxes there as required by Ireland.”

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Bryan Shaw, 52, of Lake Sherwood admitted to conspiring with KPMG auditor Scott London to trade in the stocks of the accounting firm’s clients. The pair was longtime friends who enjoyed golfing together.

With a swift “Guilty, your honor,” Shaw entered his plea before U.S. District Court Judge George H. Wu in Los Angeles.

The judge asked whether restitution was appropriate for this case. Lawyers for the federal government said the losses incurred by others would be nearly impossible to calculate.

Shaw’s sentencing was set for Sept. 16. In addition to forfeiting his ill-gotten gains, he faces as much as five years in prison and a possible fine.

Prosecutors said they would recommend a reduced sentence if Shaw provides “substantial assistance” during its investigation.

Outside the courtroom, Shaw’s attorney, Nathan Hochman, said his client had a simple motivation for his plea.

“He pled guilty because he is guilty,” Hochman said. “Mr. Shaw, as he’s been heard saying, made some incredibly stupid decisions.”

The federal government alleged that London, 50, a longtime employee of KPMG’s Los Angeles office, gave Shaw inside tips about several companies, including nutritional products maker Herbalife Ltd. and footwear company Skechers USA Inc., and that Shaw used the information to make profitable trades.

Shaw admitted that he paid London for the tips, giving him more than $60,000 in cash, a $12,000 Rolex watch, jewelry for his wife, concert tickets and expensive meals. The cash payoffs were sometimes made on secluded streets near Shaw’s Encino jewelry store, prosecutors said.

Federal prosecutors have charged London, 50, with conspiracy to commit insider trading. London, who was fired by KPMG last month, is scheduled to be arraigned May 30 in U.S. District Court in Los Angeles.

At one point, Shaw garnered gains of $450,000 on Herbalife stock, and the two men believed that they could make even more, according to the complaint in London’s case.

In one call, London referred to rumors that Herbalife may be going private, telling Shaw “that is going to be where you make a ton of money.”

London allegedly called Shaw and read him draft versions of news releases days before they went public, according to court documents. He also advised Shaw how to structure stock purchases to protect them from being discovered, prosecutors said.

The scheme began unraveling when Fidelity Investments apparently discovered the suspicious trades in Shaw’s account and froze it, said Shaw’s attorney, Hochman. Shaw received a subpoena to appear before the Securities and Exchange Commission in December, the attorney said.

Shaw later made a confession to SEC and Justice Department lawyers, agreeing to cooperate against London, Hochman said.

“One can make a logical conclusion that Fidelity probably alerted the SEC,” the defense lawyer said.

Acting at the direction of the FBI, Shaw met London earlier this year and handed him a bag containing $5,000 in cash as payment for a past tip. A photograph of that exchange, taken by FBI agents, was included in a criminal complaint filed against London.

KPMG resigned as the auditor of Herbalife and Skechers after learning of London’s conduct. 

adolfo.flores@latimes.com

Follow Adolfo Flores on Twitter.

Investors will also be scouring the Fed’s meeting minutes, which are due out Wednesday. The central bank’s stimulus programs have helped lift major U.S. equity indexes to historic highs this year, as low interest rates have made riskier investments like stocks more attractive.

But with the Dow Jones industrial average up 17% this year, investors may wonder: Is the stock market overheating?

Russ Koesterich, managing director and chief investment strategist at BlackRock, said in a note last week that the stock market was not in a bubble.

“Despite the rally, most traditional valuation metrics still suggest that stocks appear reasonably priced on an absolute basis and cheap compared to the alternatives, particularly cash and bonds,” Koesterich wrote.

Koesterich did cite one measure of stock prices signaling caution. The so-called CAPE (cyclically adjusted price-earnings) ratio indicates stock prices are “substantially above” historic averages, he wrote.

The current CAPE reading for U.S. stocks is 22.5, higher than the long-term average of 16.5. Still, Koesterich noted, the reading has been much higher — 27 in mid-2007 during the last market peak, and 44 in late 1999 before the tech bubble burst. This indicator, he wrote, “is flashing yellow rather than red.”

Many market experts expect that a correction — a decline in stock prices of perhaps about 10% — to interrupt this year’s rally.

Barclays analysts said in a report last week that investors could see a pullback in stocks of 7% to 9% once the Fed begins tapering off its bond-buying program in response to the improving U.S. labor market.

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That is one of the findings of a recent Harris Interactive poll of 2,276 adults on the subject of airline pet peeves and passenger fees.

On flights shorter than two hours, 33% of those surveyed said they would pay for extra legroom. If the flight lasts more than three hours, 58% said they would be willing to pay. Thirteen percent said they’d pay more than $25.

But even if fliers are willing to pay the fees, they won’t necessarily be happy about it.

Creed Mamikunian, a doctor from Anchorage, describes all airline fees as ridiculous and offensive. “I would rather they charge an honest price and have most things included, not this a la carte price structure,” he said.

As for pet peeves, the survey found that 63% of fliers would rather sit next to a crying baby than a smelly adult. When asked, 13% said they would prefer a plane with a child-free zone.

Michael Ernstoff, an apartment manager from Los Angeles, likes the idea of segregating children on planes.

“Parents with ill-behaved children should be placed in the baggage compartment,” he said. “I’m guessing that I might pay as much as 10% more to be on an adult-only flight.”

Still, he said, such a plan might not work: “Too many people over 21 don’t behave like adults, so segregating the adults can be difficult.”

90% oppose small knives on planes

The pressure continues to mount on the Transportation Security Administration to continue to prohibit passengers from bringing small pocketknives into the cabin of commercial planes.

Opponents of allowing knives on planes unveiled a survey last week that found 90% of likely voters don’t want the TSA to lift the ban that has been in place since 9/11.

“You’d be hard-pressed to find another issue in today’s discourse that so many people agree on,” said Laura Glading, president of the Assn. of Professional Flight Attendants, which commissioned the survey by the global research firm Penn Schoen Berland. “It’s a no-brainer.”

Debate over the issue has become heated since the TSA announced in March plans to modify the list of banned items by allowing passengers to carry small pocketknives, golf clubs, hockey sticks and novelty bats. The TSA said the move would let airport screeners focus on bigger threats, such as explosives.

But only days before the new policy was to take effect, TSA chief John Pistole announced that he would delay the new knife policy to first consider the comments of security and aviation experts.

No date has been set to implement the change.

On Virgin America, buy ‘em a round

Virgin America is making it easier to befriend other passengers at 35,000 feet.

The Burlingame, Calif., airline’s touch-screen entertainment units on each seat have a feature that lets passengers buy drinks, meals and snacks for fellow passengers and follow it up with a text message.

If you are feeling really charitable, the entertainment system lets you swipe your credit card and open a tab so you can keep the party going throughout the flight.

The service was launched last month with the start of a new Virgin America route from Los Angeles to Las Vegas.

Richard Branson, the founder of the Virgin brand, unveiled a video on the new feature, titled “Sir Richard Branson’s Guide to Getting Lucky.”

hugo.martin@latimes.com